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Offshore Investment Banking
Mergers & Acquisitions
Capital Formation

WSO-new-type-logo2Offshore Investment Banking • Mergers & Acquisition
Capital Formation • Financial Advertising

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Courting Chinese Capital

With ongoing lengthy economic recessions in the United States and Europe, entrepreneurs and others seeking investment capital  have had to broaden their search for keen investors. The Wall Street Organization, Inc. believes that given this worldwide economic climate, China and Asia will be fertile sources for venture capital funding. However, though the investment capital in China and Asia is in abundance, this does not mean it is easy to come by. Those seeking investment overseas must still insure that they have the qualities necessary to be attractive to potential investors.

coming to america

As the Wall Street Journal (WSJ) reported in November 2012, Chinese investors visiting the United States have been wooed to invest in US ventures by everyone from shrimp breeders to former President George W. Bush.  Chinese investment is on the rise in the US, with over $6.3 billion invested between January and October 2012, an annual record even before the 4th quarter numbers are counted.  Despite these positive signs, there are still certain impediments to Chinese investment in the US.         

Some of these road blocks are cultural and some are due to the political climate. Many Chinese investors have never invested overseas and are therefore very cautious. US companies seeking Chinese capital must be prepared to provide as much information as possible, presented in a thorough, comprehensive and professional matter. This information needs to include the history of the company seeking funding, as well as backgrounds of those involved in its venture. It also needs to include a detailed analysis of the market for the products or services proposed as well as any proprietary technology or process involved (a Non-Disclosure Agreement signed by all parties is of course a must before any investor presentation). US companies must be willing to be patient and responsive to any concerns raised by potential investors if they wish to come to an agreement.

The political climate between the US and China is of course outside of most entrepreneurs control. According to the WSJ, the Obama administration nixed the purchase of a wind farm project in Oregon by Chinese citizens in September of 2012 citing national security issues. However, due to the need for capital in the US, all levels of government are getting used to the idea of Chinese investment. A recent tour of Chinese investors met with Governors Scott Walker -Wisconsin, Rick Perry – Texas, and Rick Scott – Florida.

When seeking Chinese investment, it is also important to consider investor preferences. In general, Chinese investors, whether they be wealthy individuals or private companies, are seeking large deals with high returns. As one investor quoted in the WSJ article mentioned previously said “Life is short. I just want to make a few big deals.” By far the largest sectors for Chinese investments are energy, with an emphasis on clean energy such as solar and wind, and natural resources. Other industries which Beijing is actively encouraging investment in include health care, agriculture, environmental, real estate and any science or technology field.

 

 

Stay tuned for a follow up next week discussing strategies for getting a foot in the door of overseas investment. 

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